Acquisition Due Diligence
Buy-Side Due Diligence and Quality of Earnings for $5–50M Acquisitions
Mordy Steinfeld, CFE, is an independent due diligence consultant who prepares buy-side due diligence and Quality of Earnings analyses for acquisitions of businesses valued at $5–50M, especially where the books were kept for taxes, not for a buyer. He works with family offices, independent sponsors and search funders, strategic acquirers and private investors across the US, and rebuilds the financials from source records so the buyer can see which earnings the records support.
Who It's For
Buyers of $5–50M businesses
Family offices, strategic acquirers, private investors, and independent sponsors and search funders buying a business valued at $5–50M, by purchase price or enterprise value. Mordy is based in Monsey, NY, and works with buyers across the US. Clients come to him by referral, including from attorneys, accountants, brokers and bankers. For minority or early-stage investments, see investor due diligence.
Messy Books
Messy books, rebuilt from source records
Mordy's clients bring him deals with messy books or complex structures. "Messy" here means one or more of:
- Complex multi-entity structures, with money moving between entities
- Personal and business finances mixed together, and related-party dealings
- Poor or no accounting
- Cash or unreported income
Mordy, a Certified Fraud Examiner, rebuilds the financials from source records rather than taking them as presented.
What's Covered
Earnings first, then the rest of the deal
Financial and earnings quality leads the work. Other workstreams are added as the deal needs them.
- Financial and earnings quality: Quality of Earnings analyses, prepared directly, with intercompany and related-party flows traced
- Commercial: the market, customers and competition behind the revenue, and whether the growth story holds up
- Structuring and terms: working out a deal structure that gives the buyer and the seller what each wants, then negotiating the terms
- Feasibility and modeling: models built from scratch, such as sequencing models, savings ledgers, cash forecasts and unit-level models
- Operations and management, where the deal calls for it
Selected Engagements
Acquisition diligence in practice
Acquisition Due Diligence
$14M Strategic AcquisitionRegional Market Leader, Building Materials
Mordy directed the full due diligence and the deal structuring for the acquisition of a regional market leader in building materials. The deal closed.
Acquisition Due Diligence
$14.3M AcquisitionExperiential Entertainment Chain, More Than 20 Locations
Every location was a separate legal entity with its own QuickBooks file, and there was no standardized chart of accounts. Mordy rebuilt two years of financials for every location and traced the intercompany transfers between entities. The buyer walked away. Mordy then supported the buyer with financial analysis in the dispute over the deposit, which was later resolved (see forensic analysis & disputes).
Acquisition Due Diligence
Carve-Out AcquisitionNorth American Business of a Multinational Medical-Device Manufacturer
In a carve-out, the buyer purchases a division of a larger company and separates it from the parent. As part of the buyer's advisory team, Mordy tested the restructuring plan's claimed savings, and built the sequencing model (Plan A versus Plan B, with dated restructuring steps and timing shifts), a $40M+ savings ledger and a cash forecast.
Acquisition Due Diligence
$7.2M AcquisitionRegional Paper & Packaging Distributor
Mordy handled the due diligence and the deal structuring for the acquisition of a regional paper and packaging distributor.
Acquisition Due Diligence
Competitor AcquisitionsNew York City Home-Care Provider
Due diligence on a series of competitor acquisitions for a large New York City home-care provider, including a $14M target and a completed acquisition in Pennsylvania.
Other engagements include smaller acquisitions and investments in construction, healthcare services and food service.
Frequently Asked Questions
What if the seller's books are a mess?
That is the kind of deal Mordy is brought in for: several entities with money moving between them, personal and business finances mixed together, related-party dealings, poor or no accounting, or cash or unreported income. As a Certified Fraud Examiner, he rebuilds the financials from source records so the buyer can see which earnings the records support.
The owner runs personal expenses and related-party deals through the company. Can you untangle that?
Yes. Commingled personal and business finances and related-party dealings are among the situations Mordy works on. The rebuilt financials separate them, so the buyer sees the business on its own.
The business is spread across a dozen entities. Can you make sense of it?
Yes. On a $14.3M acquisition of a chain with more than 20 locations, for example, every location was its own legal entity with its own QuickBooks file and no standardized chart of accounts. Mordy rebuilt two years of financials for every location and traced the intercompany transfers.
Do you prepare Quality of Earnings reports?
Yes. Mordy prepares Quality of Earnings analyses directly. He is a Certified Fraud Examiner (CFE) with an MBA from Boston University.
Are you a CPA?
No. Mordy is a Certified Fraud Examiner (CFE), not a CPA. Where a lender requires a CPA firm's Quality of Earnings report, he works alongside that firm.
How does an engagement start?
With a call on the deal and where it stands, and a check for conflicts of interest. Mordy signs an NDA where the deal requires one, then asks for the records the work needs, such as tax returns, bank statements and the accounting files for each entity.
What do I actually get at the end?
Whatever the buyer needs, agreed at the start of the engagement. The options include a written Quality of Earnings report, the rebuilt financials and the model behind them, and/or a memo. A Quality of Earnings analysis can include an adjusted EBITDA bridge, a proof of cash, a net working capital analysis, and financials rebuilt entity by entity with the intercompany transfers scheduled.
Will my lender accept your Quality of Earnings?
It depends on the lender. Some lenders, SBA lenders in particular, require a Quality of Earnings report from a CPA firm. In that case, Mordy can rebuild the financials first, so the CPA firm's work starts from clean numbers, and work alongside that firm for the buyer on commercial diligence, deal structure and terms, and testing its findings. Where a CPA firm's report isn't required, he prepares the analysis directly. Ask your lender which it requires before the work is scoped.
Do you work alongside my attorney and the rest of the deal team?
Yes. Clients come to Mordy by referral, including from attorneys, accountants, brokers and bankers, and he works with the buyer's other advisers. Where a lender requires its own Quality of Earnings report, he works alongside the firm that prepares it.
Is it only the numbers?
No. Financial and earnings quality leads, and the work can extend to commercial diligence, deal structure and terms (including negotiating them), feasibility and modeling, and operations and management.
What industries have you worked in?
Acquisitions in industries including entertainment, building materials, distribution, home care, medical devices, construction, healthcare services and food service; investments in digital health, risk intelligence and compliance software; and hotels and real estate throughout.
What size deals, and where?
Businesses valued at $5–50M, by purchase price or enterprise value, for family offices, strategic acquirers, private investors, and independent sponsors and search funders. Mordy is based in Monsey, NY, and works with buyers across the US.
Is this confidential?
Yes. Engagements are confidential, and the examples on this site are anonymized.